Bonds firmer after 'strong' auction

Johannesburg - South African bonds were firmer in
midday trade on Tuesday, on the back of what a trader described as a
"strong" government bond auction.

At its weekly auction, the National Treasury received bids
totalling R2.48 billion for R500 million worth of R203 bonds at a
clearing yield of 6.880%, bids totalling R1.09 billion for R500 million
worth of R208 bonds at a clearing yield of 7.595% and bids totalling
R2.94 billion for R1.1 billion worth of R214 bonds at a clearing yield
of 8.920%.

At 11:50, the benchmark R157 bond was trading at 6.330%, from
Monday's close of 6.340%. The R207 was bid at 7.530% and offered at
7.500% from a previous close of 7.540% and the R186 was trading at
8.240% from its close of 8.275%.

The rand was bid at 8.2583 against the dollar from yesterday's close of 8.2088.

"The auction didn't go too badly especially around the R203s,
which cleared about 2 points through market. The R208s and R214s were
basically at market. There are a few bids around for the back-end - with
the curve this steep it does offer a bit of value. We aren't seeing
very big flows though," a trader said.

SA's composite leading business economic indicator rose by 0.1
% year on year (y/y) in March after a 0.2% y/y decline in February,
data released on Tuesday by the South African Reserve Bank (SARB)
showed.

The SARB said the composite leading business cycle indicator
increased by 0.1% in March 2012 compared with the preceding month.

Earlier, Absa Capital said that markets would likely remain
hostage to the possibility of unexpected headlines pertaining to the
eurozone crisis.

Two key sets of data will be released this week, namely
consumer inflation (CPI) data and a statement from the South African
Reserve Bank's (SARB) Monetary Policy Committee (MPC).

The MPC starts its three-day meeting today, with the announcement on interest rates expected on Thursday afternoon.

Foreigners were net sellers of R684.646m of South
African bonds including repo transactions on Monday after net purchases
of R685.119m of local bonds on Friday, data released by the JSE
shows.

Nominal cumulative volume was R91.819bn on Monday from R55.158bn on Friday.

Foreigners were net sellers of R689.472m of South
African bonds excluding repo transactions on Monday after net purchases
of R683.462m of local bonds on Friday.

For the year to date foreigners have been net buyers of
R37.828bn of local bonds, excluding repo transactions. In 2011
they were net buyers of R47.359bn worth of local bonds, excluding
repo transactions.

In the year to date foreigners have been net buyers of R33.860bn of local bonds including repo transactions. In 2011 they bought
R37.501bn of local bonds.